Paul Kedrosky's Infectious Greed

An interesting Wall Street Journal story today on the “Buffalo Spammer”, a fellow who was rotating through multiple Earthlink accounts sending millions of spam messages. Apparently the WSJ story was very well-timed: he was hit with $14mm in fines late today.

That is, of course, interesting in and of itself. But more interesting, to me anyway, is the changing economics this will create for spammers.

Historically spam has been a free-rider on the email networks: the rest of us have paid the freight for email users who flooded network capacity far in excess of their monthly charges. There were many solutions, but ISPs were uninterested in them, things like charging per megabyte, charging for over a certain number of email messages being sent per day/week/month, and so on.

Instead ISPs responded by kicking users off their networks. In effect, they forced spammers to open new accounts with new stolen credit cards or forged identities (or both). This was sometimes effective in the short term, but it wasn’t much of a long-run deterrence. Specifically, it imposed negligible costs, and it didn’t eliminate the free-rider problem. It was sort of like kicking vandals out of your house rather than prosecuting them.

Now, however, with Earthlink successfully bringing suit against a profligate spammer, it will almost certainly help to make those exogenous costs endogenous for the spammer. They must worry that, if caught, they will face similarly high penalties, rather than simply being kicked out for sending emails.

But there is still one worry: look at how much effort was involved on Earthlink’s part in tracking down this one spammer. It was very, very costly. While it wasn’t “$14mm costly”, it was certainly at least a million dollars. Small ISPs will rarely do a Clifford Stoll and seek such interlopers out, so it is unclear to me, in the absence of better email tracking, how effective Earthlink’s action will end up being.